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The popularity of diabetes and weight loss therapies utilizing glucagon-like peptide 1 (GLP-1) receptor agonists have prompted forecasts for a total addressable market as high as $200 billion. Goldman Sachs has projected that Novo Nordisk and Eli Lilly will control a combined 80% share of market for anti-obesity drugs by the end of the decade. Those two companies have built on successful diabetes therapies in Ozempic and Mounjaro, rolling out Wegovy and Zepbound for weight loss. These products utilize semaglutide and tirzepatide as their active ingredient, respectively. While these two companies will try to consolidate their first-mover advantage, they will also need to find a way for their products to overcome competition from surgical procedures.
MRP first highlighted the impact of obesity drugs on the surgical business when companies like Intuitive Surgical, which uses robots to automate several surgical procedures, cited a drop-off in growth from US bariatric surgeries in July 2023. At the time, we noted that Though surgery is associated with fewer side effects, and remains a cheaper option than medicating with the leading weight loss drugs on the market today in many instances, softening demand for bariatric procedures could become more widespread and continuous if medications for obesity continue to grow in popularity.
However, new data in a preliminary study, recently presented at the American Society for Metabolic and Bariatric Surgery (ASMBS) 2024 Annual Scientific Meeting, found that bariatric surgeries (specifically, Roux-en-Y gastric bypass and sleeve gastrectomy) are the superior options in terms of achieving greater weight loss and achieving long-lasting success in keeping the weight off. The surgical options resulted in average weight loss of 29.5% to 31.9% one year out from the surgery, depending on which procedure was undertaken, while those receiving semaglutide and tirzepatide injections saw their weight loss plateau after 17 to 18 months at an average loss of 14.9% to 22.5%. Additionally, those who underwent surgery maintained a weight loss of about 25% for up to 10 years after surgery, which indicates that the results are sustainable. Similar long-term data regarding the GLP-1 agonists was not provided by the study results, but they did show that those who discontinued injections of semaglutide and tirzepatide well-before the plateau period, undergoing treatment for only 20 to 36 weeks, regained half of the weight they lost within a year.
That final conclusion builds on results from a separate 2022 study funded by Novo Nordisk, and cited by The Wall Street Journal, which found that patients regained two-thirds of their lost weight a year after they stopped taking semaglutide, the main component of Wegovy. A separate study following patients who had taken tirzepatide, the compound in Zepbound, for 36 weeks – losing almost a fifth of their bodyweight on average. After that period, half of the participants continued to take a high dose of tirzepatide for a year while the other half received a placebo shot. Even with diet modifications, exercise, and counseling, those in the placebo group gained back 14% of their body weight on average. Participants who continued taking tirzepatide lost an average, another 5.5% of their body weight.
This data could bolster confidence in previous responses from Intuitive to their investors when questioned about the impact of GLP-1 drugs on demand for bariatric procedures, which represent up to 5% of total global procedures at the company. As part of Q3 2023 results, Intuitive Chief Medical Officer Dr. Myriam Curet stated that patients potentially in the pipeline for bariatric surgery might go over to injectables in the short-term, but “compliance issues, cost, side effects” would eventually force them off the drug and potentially back toward surgical options that likely provide a more sustainable long-term benefit. In fact, Curet suggested that “overall we’ll see an increased interest in bariatric surgery, but that will get delayed in the short term.” Such an assertion has also been bolstered by additional new findings presented at ASMBS, which show that GLP-1 drugs could be taken in preparation for surgery to help with pre-surgical weight loss. Losing weight prior to the procedure kick starts the weight loss process and makes the patient less likely to suffer from complications.
Though surgery is certainly more daunting than an injection for most, bariatric interventions seem to maintain an advantage over GLP-1 drugs for now in terms effectiveness. In terms of cost before insurance, the costs are also relatively similar. Per GoodRx, the price of bariatric surgery has a wide range of anywhere from $7,400 to $33,000, but if we take the study data presented at ASMBS and assume that it takes 17 to 18 months to achieve the maximal impact of injectable therapies like Wegovy (which can sell for as much as $1,350 for four once per week injectors), that would rack up a price tag toward the upper portion of that range, around $24,300. Without insurance, the price tag of both options would simply be too hefty for many that are either uninsured or would not be granted coverage for such a prescription. Though insurance providers can sometimes be hesitant to cover GLP-1 drugs, Doug Langa, Novo Nordisk’s Vice President for North America, has estimated that about 50 million Americans with obesity could be eligible for Wegovy coverage under their health plans. Further, Novo claims that 80% of US patients with insurance coverage taking the drug pay less than $25.00 out of pocket per month.
The problem is, coverage may be dependent on prior authorization, meaning insurers can require a supervised medical weight management program prior to approval for more advanced and costly treatment. Though researchers surveying the medical policies of the 64 highest market share health insurance providers in the US found in 2020 that 95% of the companies had defined pre-authorization policies for bariatric surgery, insurers may be prepared to lower the bar for this option if it endures as the most effective treatment for obesity and its comorbid medical problems. According to Medscape, Blue Cross Blue Shield of Michigan removed pre-authorization requirements for the procedures in September of last year. BCBS carriers in Massachusetts and Vermont have since updated their protocols as well. Similarly, regional health care provider Pennsylvania Geisinger Health Plan expanded its coverage.
To increase their addressable market, manufacturers of GLP-1 based therapies will need to make their drugs cheaper or more effective. Since the gap between the results of bariatric surgery and obesity drugs is still so large, it may be most effective to take on the cost of surgery. Eli Lilly is set to address the price issue by fundamentally changing the delivery of their therapy. As CEO Dave Ricks recently told the Wall Street Journal, the next generation of its GLP-1 drugs will be delivered in pill form – making it even easier for patients to take the product and easing the supply chain issues associated with pumping out injectors. Oral forms of GLP-1 agonists would ease the chronic shortages that play a big role in pushing up prices to unreachable heights for most Americans. It is unlikely that any other market will be more lucrative than the US as these products sell internationally for just a fraction of the expensive American list price. Researchers from non-profit organization KFF have found that Wegovy is priced as low as $328 in the Netherlands and $296 in Sweden.
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